Ambac Debt Swap on Schedule Despite Puerto Rico Unknowns

A U.S. bond insurer moved a step closer to executing a proposed $5 billion restructuring deal designed to solve a cash crunch that dates to the U.S. housing bust, WSJ Pro Bankruptcy reported. A Wisconsin judge has paved the way for Ambac Assurance Corp. to offer up the proposed transaction for court approval early next month, overruling a group of dissident hedge funds who wanted the proceedings delayed. Regulators seized part of Ambac’s business in 2010 to contain the damage from insurance policies on real estate securities and derivatives that had imploded along with the housing market. Now Ambac has developed a proposal to wind up its bad bank, also known as the segregated account, and end the state-supervised rehabilitation after eight years. The transaction would exchange $3.8 billion in deferred policy claims and $1.2 billion in surplus notes for a combination of cash and debt worth 93.5 cents on the dollar. But Cyrus Capital Partners LP, Polygon Global Partners LLP and Taconic Capital Advisors LP have accused Wisconsin’s Office of the Commissioner of Insurance of underestimating future losses on Puerto Rico bonds, which could undermine the economics of the deal.